I rarely write articles outlining predictions for retail. However, this is year is different because of all the ridiculous articles that have been appearing regarding what to expect in 2021. Specifically, I can’t get over how many reporters and authors have all stated the same thing, we will never get back to normal. Come again?
Why would we want to go back to the way things were in retail early in 2020 prior to the arrival of COVID? In a period of about 10 months, a massive number of changes have taken place in retail with most of them being better for the consumer. Yes, a large number of retailers filed for bankruptcy and some even went out of business. However, I will argue that most of the retailers that filed for bankruptcy were already struggling. and offered very little in terms of value to consumers. In fact, the majority of retailers that declared bankruptcy had already lost relevance in the eyes of the consumer, like the retailer JC Penney.
Many retailers struggle to maintain profitability. They face market pressure and shareholder pressure. They strip out cost to try to preserve margins, reducing investment, which can exacerbate their problems. Generally, these companies go through consolidation or they fail.
In many ways, what I see taking place in retail is similar to what’s happening with movie theaters. The first movie theater in America opened on June 19, 1905 in Pittsburgh, PA, for over 100 years, very little has been done to change the experience. Louder volume? Yes. Better cameras? Yes. Better customer experience? Not really. Instead of developing a better model for delivering movies to customers, theater chains only tried to improve the current state.
Movie theaters were designed for another era just like department stores.
I see tremendous similarities between the former video rental company, Blockbuster, and large movie chains like AMC and Cinemark. Why didn’t Blockbuster acquire Netflix for $50M in September 2000? Arrogance. Why haven’t the largest theater chains partnered with movie studios to transition consumers away from movie theaters to direct streaming of movies, or come up with an alternative model? Maintaining the status quo is easier. And they’re also arrogant.
COVID shook up the status quo and exposed the fact that many retailers are run by executives who are incapable of embracing change or being innovative so they maintained the status quo. Well-managed retailers quickly pivoted and created business models that helped them excel even in a pandemic.
Will COVID be gone by the end of 2021? Maybe, maybe not. No one knows the answer so my advice is focus on the reality of the situation and don’t waste time wishing for getting back to normal. Instead, damn the torpedoes, full speed ahead.
Predicting vs. Recommending
In this 2013 research paper, I made the recommendation for Amazon to acquire Whole Foods. In addition, I designed one of the first micro-fulfillment centers and and I designed a new grocery store concept I call the ‘multi-format store’. I didn’t work for Amazon when I wrote the paper yet Amazon did acquire Whole Foods in 2017, Amazon has built stores nearly identical to my design, and Amazon is experimenting with micro-fulfillment technology that can be utilized in spaces between 4,000 to 20,000 square feet.
Instead of predicting what Amazon (or any other company) will do, I prefer to analyze data, evaluate industries and trends, and then make recommendations. Few people are willing to do what I do because if I’m wrong, there is nowhere to hide. Stated another way, predicting that something will happen is far more forgiving than recommending a company or an individual do something. If the person or company fails, the blame is equally on the person who made the recommendation.
I’m willing to take the criticism if I’m wrong. So far, I have a very successful track record of making recommendations that became a reality. For example, in July of 2019, I recommended that Walmart and Microsoft partner to acquire Tik Tok. It nearly happened in August 2020. I can list similar examples.
I am often asked by the media and many others why I’m so accurate. As one reporter asked me in August when news broke of Walmart and Microsoft bidding to buy Tik Tok’s U.S. operations, “What’s your secret?” Here it is – the more I research, the more accurate my recommendations. In addition, for every recommendation I make, I apply game theory to analyze the impact of the recommendation. If what I recommend fails the game theory test, I drop it.
What I look for in a company is their ability to leverage M&A to increase their differentiating capabilities and align their portfolio of products with the markets in which they compete. Companies have to earn the right to win, it doesn’t just happen. Salesforce and Microsoft are two companies that I believe do a fantastic job of leading.
Retail Recommendations 2021
Making recommendations to any company during a pandemic with an economy that requires multiple stimulus packages is challenging to say the least. However, due to so many requests to write this article, I have created a list that I believe is accurate. Let me be clear, I am not predicting that the companies I list will do the things that I’ve written. I am encouraging the companies I’ve listed do what I recommend. Big difference.
One final comment, when I make a recommendation, I do so only to propose an idea. I do not list every reason related to the pros and cons of the recommendation nor do I go into excruciating detail about why an idea may or may not be successful.
TikTok – Owned and operated by ByteDance, TikTok is the most dynamic social media platform in existence. In addition, TikTok is also the platform with the most potential for retailers, influencers, politicians, and corporations. Retailers must ask and answer this question, “What is our TikTok strategy?” To increase retail sales, I encourage ByteDance to invest in partnerships with companies to fulfill online orders. A BIG Move that FedEx can make is investing in TikTok to become the dedicated fulfillment provider. I am on the record since 2018 stating that FedEx should have acquired TikTok or partner with a company to acquire TikTok. TikTok will expand into streaming video for retail.
I’ve researched TikTok since its inception and I’ve always believed in its potential; so much so that in July 2019, I recommended Walmart to partner with Microsoft to acquire TikTok. I anticipate that TikTok will expand its technology capabilities to include AR/VR to enhance videos. I remain convinced that TikTok is going to expand into long-form videos, original content series and movies, and news. I strongly recommend that ByteDance acquire CNN or Twitter. I understand there may be resistance because ByteDance is a Chinese-owned company. However, it doesn’t change the fact acquiring Twitter or CNN is a strategic fit for the company.
ByteDance has interesting partnerships it can form. For example, a partnership with Shopify is worth exploring. Partnering with healthcare companies and pharmacies is also recommended.
ByteDance has unlimited potential. ByteDance, through TikTok, can become the next Facebook, Instagram, and YouTube. Only bigger.
Tesla – The biggest challenge for Tesla in 2021 will be executing their business plan and maintaining their high standards for quality. In addition, as Tesla introduces new models, like the Tesla semi-truck, the company cannot fail at any level or their stock will be crushed. Even a hint that Tesla can’t execute will result in significant stock losses. I believe Tesla will do quite well in 2021. To accelerate revenue and growth, and create an even greater competitive advantage, I recommend that Tesla acquire Jeep from Fiat Chrysler Automobiles.
I also recommend that Tesla acquire Palantir. If given the choice of acquiring Jeep or Palantir, I would choose Palantir if I was Elon Musk. The majority of people believe Tesla is a car company. That is false. Tesla is in fact one of the most advanced technology and data companies in the world that just also happens to build and sell cars. Cars are a commodity, data is the new oil.
Zoom – With a market cap of $116B, Zoom is in an excellent position to make a big move. Zoom is also becoming a sought after acquisition target with Facebook, Cisco or Google potentially wanting to acquire the company. However, I strongly recommend that Zoom tread very carefully in 2021. Instead of making a big move, I advise Zoom to correct some of the issues they’ve identified with their platform. Zoom’s platform has to be flawless in my opinion in order to grow and scale at an accelerated rate.
I don’t want Zoom to do nothing in 2021. On the contrary. I do want Zoom to make acquisitions but I want Zoom to make the right acquisitions. If I ran the company, I would acquire Electronic Arts, Take-Two Interactive, or Activision Blizzard. I believe gaming and esports are an excellent fit for Zoom and the acquisitions I listed are manageable and strategic for the company.
My Wild Card pick – Zoom acquires CNN.
Shopify – The Canadian-based e-commerce company is on fire. In 2016, I encouraged Walmart to acquire Shopify over Jet.Com. Walmart shut down Jet.Com and Shopify now has a market cap of $146B. I’ve written since 2018 that Shopify is becoming a massive acquisition target with Facebook, Google, Microsoft, Berkshire Hathaway, and Amazon all circling the company in my opinion. However, for the purpose of this article, I am going to focus on what Shopify should do. I believe the best option for Shopify is to acquire Instacart. Period. End of story. However, if Shopify acquires Instacart, they need to be prepared to make significant changes at the executive level and invest in making operational improvements.
Instacart – I remain convinced that Instacart will launch their IPO no later than 2021. I recommend that Instacart reengineer the majority of their business model. For example, Instacart hires associates who own their own cars, and Instacart strives for a two-hour service level from order to delivery. In addition, Instacart strives to deliver two orders per car. This is hardly the way to make money in the e-commerce. Let me be clear when it comes to Instacart, they are a company that has always been lucky but they aren’t that good. Without major changes to their business model, Instacart will have a short shelf life.
Although its possible that Amazon, Facebook, Shopify or possibly even Walmart or Google could acquire Instacart, I’m not convinced that it will happen.
I recommend that Instacart accelerate the launch of their IPO and immediately invest in opening 100 micro-fulfillment centers powered by Attabotics, AutoStore or Fabric. Instacart must remove the fulfillment of groceries from the stores of their grocery customers and instead, automate the process of fulfilling online orders using micro-fulfillment centers. This will significantly increase the value of Instacart’s stock price and also increase the value of Instacart to their grocery customers.
I also recommend that Instacart design a strategy whereby they will become an online grocery retailer no later than 2025; this will require Instacart to open more micro-fulfillment centers and also invest in larger fulfillment centers. From a strategy perspective, it doesn’t make sense for Instacart to fulfill online orders for grocery retailers if they can become an online grocery retailer and fulfill online orders direct to customers. I also encourage Instacart to open Instacart branded grocery stores in select locations.
Ignore my recommendations at your own peril, Instacart. You are a house of cards. You know it and I know it.
Amazon – I continue to believe that Amazon must accelerate their grocery strategy. I recommend that Amazon open grocery stores inside each Kohl’s. Amazon and Kohl’s already have a partnership so expanding the partnership should be easy. If the pilot for testing groceries inside Kohl’s is successful, Amazon should acquire Kohl’s.
Amazon should also assess acquiring Target and opening Whole Foods Markets or Amazon-branded stores inside each Target. A combined Amazon Target would generate tremendous value for both companies plus their customers.
Amazon is at a severe disadvantage when it comes to groceries because they have so few stores when compared to Walmart, Kroger and other leading grocery retailers. 2021 must be the year that Amazon accelerates their strategy for opening more stores. At a minimum, Amazon must operate 2,150 physical stores.
I recommend that in 2021, Amazon must solve the riddle of online grocery fulfillment. My advice has not waivered – enter into an agreement with Attabotics or AutoStore and leverage their micro-fulfillment center technology to automate grocery fulfillment. Invest in designing and installing Nano-fulfillment centers inside select Whole Foods locations or increase the number of automated dark stores to fulfill online orders for Whole Foods.
Regarding Whole Foods, I believe Amazon has made a mistake in not converting Whole Foods into ‘Whole Health’ focused on wellness, health, fitness, and nutrition. John Mackey should be removed as CEO of Whole Foods and turned loose to create Whole Health.
Amazon is such a large company that I can write for hours outlining potential acquisitions such as MGM Studios, Palantir, Menards, Tractor Supply and any number of health care providers. However, I rank Shopify and Instacart at the top of the list of companies that Amazon should acquire. If Shopify continues to grow at the same pace, they will become a major threat to Amazon. In fact, I believe Shopify is quickly becoming the only predator Amazon fears.
Instacart is a major competitor of Amazon. If Amazon acquires the company, it can shift Instacart’s focus to managing all deliveries for groceries and Prime. I also believe Amazon can scale Instacart’s business to offer in-home services similar to what Geek Squad provides for Best Buy. Truth be told, acquiring Instacart will serve one primary purpose – eliminating a competitor.
Amazon is making a play in fashion but an online only model for fashion will be challenging for many reasons. I believe the odds are increasing that Amazon will acquire a fashion retailer with Neiman Marcus, Macy’s, Saks, and Dillard’s leading the list. Macy’s should be the first choice of Amazon for an acquisition.
The Wild Card – Amazon spins off AWS to get Congress off its back.
The ‘I can’t believe Brittain said it’ Wild, Wild Card – Amazon acquires Costco.
The ‘You read it here first’ Wild, Wild, Wild Card – Is Whole Foods strategic to Amazon? If so, why doesn’t Amazon talk about Whole Foods? Did Amazon make a mistake in acquiring Whole Foods? No, I don’t believe Amazon made a mistake in acquiring Whole Foods, but I do believe Amazon made a mistake in not taking 100% command and control of the company including placing an Amazon executive in the role as CEO or hiring an executive from a leading grocery retailer to become CEO.
Have market conditions shifted so severely that Whole Foods no longer fits into Amazon’s ecosystem? I believe an argument can be made that the answer is yes. Can an argument be made that Amazon should divest Whole Foods and acquire another retailer? Yes. The odds are low of this happening, but I will not be surprised if Amazon divests Whole Foods. Based on discussions with executives at Amazon, I am under the impression that Instacart is viewed as a better fit for Amazon.
My advice is retain Whole Foods unless Target or Costco are willing to make an offer to acquire the company.
Walmart – Like Amazon, I can write for hours regarding all of the big things Walmart can do from partnering with Microsoft and FedEx to acquire Shopify, merging with Home Depot, acquiring FedEx, or acquiring any number of large healthcare conglomerates. Walmart has options. Lots of them. However, what I recommend Walmart do above everything else is invest heavily in automating their 150 + distribution centers, grocery fulfillment centers, and their e-commerce fulfillment centers. Conservatively, Walmart should set a goal of reducing their distribution and fulfillment center workforce by 50% no later than 2025.
2021 needs to be the year that Walmart commits to increased automation including micro-fulfillment centers across their retail ecosystem. I recommend that Walmart explore an acquisition of the very capable robotics company, Gideon Brothers.
I have tremendous respect for Walmart but I do believe the company is at risk of losing the grocery war to Amazon. Walmart generated 55% of their revenue from groceries in 2019, and I believe the number will be higher in 2020. Although it’s true that Walmart operates 5,347 stores in the U.S. (including 599 Sam’s Clubs), I believe that Walmart’s stores are today’s version of the Maginot Line.
To beat Walmart at groceries, Amazon doesn’t have to operate the same number of stores, Amazon simply needs a better strategy. I anticipate that in addition to several thousand stores, Amazon will open several thousand micro-fulfillment centers plus utilize thousands of their own vans to extend their grocery ecosystem and meet the needs of consumers faster than Walmart. 2021 should be the year that Walmart evaluates and improves their grocery model.
Gap – I remain incredulous at how Gap continues to struggle as a company. Banana Republic, Old Navy, Gap, and Athleta are brands with tremendous potential yet the company never seems to achieve their potential. I highly recommend that Gap scale back their operations globally. The company has 3,785 stores located in 43 countries. I disagree with this and I believe the company should reduce their store count and focus only on the most profitable countries globally. This means the company could close as many as 1,000 stores.
Consumer apparel trends have shifted significantly because of COVID. However, Gap has struggled to generate sales of their apparel and accessories even before COVID. A review of all fashions is warranted.
I also dislike Gap’s distribution and supply chain. I strongly encourage the company to have the courage to explore exciting new distribution and fulfillment models leveraging micro-fulfillment. In addition, I remain convinced that Gap should approach Amazon to manage their entire supply chain including inventory management, store replenishment and online fulfillment of orders. Conservatively, Gap can reduce their annual logistics and supply chain-related operational costs between 20% to 30% if they partner with Amazon.
The Grocery Industry – I have been quoted in multiple publications stating that the dumbest business model ever created is the current state online grocery ordering and fulfillment model. On average, grocery retailers can lose up to $25 on every online order they fulfill. The business model isn’t sustainable.
I recommend that grocery retailers commit to using micro-fulfillment centers inside select stores or inside dark stores to automate online grocery fulfillment.
I recommend that grocery retailers leverage companies like Tortoise Cart (or other delivery robotics companies) for last mile delivery.
I recommend that grocery retailers explore the use of Robomart for mobile retail.
I recommend that all grocery retailers explore a relationship with DynoSafe to leverage their temperature controlled container for online groceries and other products. Retailers that ‘win the porch’ will win in retail. Another option is to explore a partnership with eDOR.
I recommend that several large grocery retailers make a big move by merging. Specifically, Albertsons should merge with Ahold-Delhaize. Kroger should merge with Target.
The Wild Card – Costco acquires a grocery retailer. Whole Foods would be an excellent acquisition for Costco to make but the odds are low of that happening. Sprouts is a possibility but I recommend Costco acquire Grocery Outlet or Boxed. Another option Costco can pursue is acquiring Target’s grocery business. Target sold their pharmacy business to CVS so it’s not beyond the realm of possibility that Costco could acquire Target’s grocery business. I also recommend that Costco copy Pinduoduo’s social commerce model especially for groceries.
Retail Apocalypse – Retailers will continue to close stores at a rapid pace. Executives will pat themselves on the back for saving their companies. Ridiculous. Closing stores only reduces the ability of a retailer to compete. Size matters in retail. Shrinking the size of a retailer results in a weaker company, not a stronger one. Retailers must learn to focus on understanding and attracting profitable customers, and positioning their companies for profitable growth. How? By raising prices and maximizing margins. Instead of closing stores, maximize the strategic and financial value of each store. I strongly recommend Boards of Directors insist on hiring financial advisors and strategy consultants to identify the optimal pricing and asset improvement strategy vs. closing stores. More discounts and more store closings aren’t the answer, they’re the problem.
Convenience Stores Go Big Into Groceries and Meals – I continue to believe that convenience stores have failed to take advantage of the growth of private label brands in the grocery industry. Aldi is one of the leading discount grocery retailers globally selling their private label brands. Many convenience store chains manufacture and sell their own private label brands.
I encourage large convenience store chains to leverage micro-fulfillment centers to fulfill online grocery orders for their customers. Temperature controlled lockers can be placed outside of stores for customers to retrieve their groceries. Groceries can also be delivered direct for a fee.
I also recommend investing in dark kitchens to sell hot food and prepared meals to their customers.
I believe the convenience store industry will have increased competition from DashMart, owned and operated by Door Dash. goPuff will continue to expand.
Wild Fork Foods – I was part of the team that created Wild Fork Foods. The goal was to create a physical and online experience for consumers to purchase high-quality frozen beef, poultry, seafood, vegetables and desserts. All products are frozen at their peak of freshness ensuring higher and longer lasting quality. A much larger assortment of products is also offered in stores and online. With 35 stores currently in operation and a growing e-commerce business, I estimate that Wild Fork Foods will expand rapidly over the next three to five years. I believe the company will operate close to 700 stores by 2025.
I’m convinced that Wild Fork Foods will disrupt the multi-billion dollar beef, poultry and seafood industries through innovation and branding. As consumers learn about the increased assortment, better pricing and exceptional quality, I anticipate that consumers will turn to Wild Fork Foods for their protein needs vs. buying protein at their local grocer.
2021 is a critical year for growth as the company will expand outside of Florida where most of its stores are located. This will cause severe stress on the supply chain.
Owned and operated by JBS, Wild Fork Foods has exceptional potential for growth.
Big Vending Machines – I have mentioned micro-fulfillment several times in this article. I strongly recommend that specialty retailers, Big Box, grocery retailers and department stores introduce the use of micro- fulfillment into their retail ecosystems. I believe and recommend that all retailers with a large number of stores, strive to turn their stores into ‘big vending machines’ capable of fulfilling orders to customers 24/7, 365-days per year.
The Year of the Dragon – I believe China’s influence in retail will increase. With a new President in the White House, I anticipate that China will aggressively leverage their influence to possibly enter the U.S. market by making an acquisition of a major retailer. Alibaba acquiring Albertsons, Costco or Target is a possibility.
I also believe that China will want to change the game when it comes to retail. Instead of continuing to manufacture large amounts of goods and shipping them in containers to the U.S., I anticipate that China will want to influence consumers in the U.S. to accept a Manufacturer to Consumer (M2C) model. In essence, China’s manufacturers create a massive online marketplace, consumers select what they want and the manufacturer creates the product and ships it direct to the consumer. Yes, the logistics will require that orders are consolidated in shipping containers for delivery to the U.S. However, in a M2C model, consumers will be incentivized to accept slower delivery in return for better pricing and easier selection. Consumers will also have an option of paying expedited air shipping.
From a supply chain perspective, it doesn’t make sense to me for retailers to continue buying in bulk from manufacturers. A client of mine is one of the largest manufacturing and logistics conglomerates in China and they believe what I outline will accelerate. Retailers and manufacturers need a better business model. Applying more science to retail and the supply chain is mandatory. China is best positioned to drive change and I’m sure they will do so as it increases their strategic value.
Direct to consumer is increasing. So too will Manufacturer to Consumer.
Collaboration Accelerates Innovation – I have a realistic view of business. Recommending that companies partner vs. making acquisitions sounds nice but in reality, someone has to be in charge and partnerships rarely work long-term. The only exception to the rule is possibly last mile delivery. A severe problem associated with e-commerce is the exorbitant amount of packages being delivered to homes and businesses. Every day in America, FedEx, USPS, UPS and Amazon deliver millions of packages. In many cases, delivery companies make more than one delivery to the same home in the same day.
Last mile delivery for parcels is broken. I believe there is a better way but it will require collaboration and innovation.
What I propose is the following:
- Design a delivery truck with four large compartments to allow Amazon, FedEx, UPS and the USPS to place their packages. Instead of multiple delivery trucks making deliveries, a specially designed delivery truck will make the deliveries. Each parcel company and Amazon will have their packages delivered. The driver will be an independent contractor tasked with driving and retrieving packages. If the parcel carriers and Amazon were willing, they could create a new method for delivering packages that wouldn’t require such an extravagant delivery vehicle. Instead, any parcel company and Amazon can collaborate and deliver each other’s packages. I believe there will be a limit to how willing the companies will be to collaborate.
- Amazon, FedEx, UPS and the USPS agree to pilot a program whereby customer and delivery data is shared. The goal is simple – consolidate as many orders as possible on the same truck going to the same customers.
- Amazon, FedEx, UPS and the USPS will have to collaborate on a shipping model capable of consolidating packages in a shared sortation center. (Make no mistake, this will be a monumental effort).
I don’t believe the current model is sustainable. Inviting the parcel carriers and Amazon to collaborate should be explored. In addition. states and the Federal government have the right to mandate a reduction in deliveries to reduce carbon emissions, traffic and accidents.
AR/VR and the End of Stores – If Jeff Bezos is correct when he states that consumers will continue to want low prices, choice and increased delivery speed, I believe that technology will be required to make what Bezos states become a reality. Sonner than people realize, we are going to run into a wall when it comes to the speed of deliveries. Drones? Don’t make me laugh. Drones are overrated and the use of drones flies in the face of the science of optimizing logistics. A better model would be to utilize small autonomous helicopters capable of carrying larger payloads and making more deliveries. The weakness of drones is that they have a 1 to 1 ratio – One drone, one package, one delivery. Repeat.
I am convinced (I can also be wrong) that the future of retail is utilizing AR/VR to create a virtual shopping experience that can be personalized for consumers. Instead of shopping online or going to a physical store, consumers will shop from the comfort of their homes with the option of experiencing the most dynamic and immersive shopping experience they’ve ever encountered. I anticipate that by the end of 2021, much of what I outline in this article will begin to take shape. It’s plausible that one of several startups that I’m aware of will unveil a virtual store and retail ecosystem.
More bankruptcies will occur in 2021 which shouldn’t be a surprise to anyone. Clothing retailers have been hit especially hard as have malls. Let me be clear – malls are dying, malls are terminally ill, and nothing can save the majority of malls operating today.
One of the reasons why I recommended in 2018 for Amazon to acquire JC Penney, is so that Amazon can have first-mover advantage opening fulfillment centers inside B and C malls. In addition, Amazon can open grocery stores and multi-use retail stores in Class A malls with robust sales. I still believe Amazon will acquire many JC Penney stores, possibly some of JC Penney’s private label brands, and most if not all of JC Penney’s warehouses.
I don’t see much of a future for Macy’s and other large retailers that refuse to hire the best executives to run their companies. I continue to see far too many retailers implementing the wrong strategies and failing to create innovative business models.
Target overall is doing an excellent job. However, I continue to believe that Target should explore selling their grocery business to Costco, Kroger, Lidl or another retailer. I also believe Target has no idea what to do with Shipt, the delivery company they acquired for $550M in 2017. When compared to Instacart, it’s clear that Shipt has failed to come close to achieving similar results. I believe DoorDash or Uber should acquire Shipt.
Live Streaming will increase but continue to trail what’s taking place in China.
Tik Tok has incredible potential for retail and I believe we will see them make great strides.
Facebook is making a mistake by not being more aggressive or making a big move to increase their differentiating capabilities. I believe Facebook should do whatever is necessary to acquire Shopify. There is no other acquisition or strategy that Facebook can utilize that will give it the ROI and strategic advantage than acquiring Shopify.
The one constant will be change. I believe the retail industry will see more changes taking place between 2020 and 2030, than what took place in the prior 100 years. The growth of e-commerce will be significant.